A password is a secret you have to remember, type, and hope nobody steals. A passkey is a key that lives on your phone or computer, locked behind your face, fingerprint, or screen code. You never type it, so there's nothing to steal, and it only works on the real My Local Press; a look-alike site can't even ask for it.
It lives with your saved passwords, in Apple's iCloud Keychain or Google's Password Manager, and follows you to your other devices, so a lost phone doesn't lose the key; your password keeps working as a backup. Face ID and fingerprints only unlock the key, on your device; we never see them. If you signed up with Google, Apple, or Facebook, your sign-in is already protected the same way, by them. Create one in Settings → Password and passkeys; after that, the sign-in page offers it automatically.
If you use the Android app, that same list also shows a Restore key · Android. It isn't a passkey you pick at sign-in; it's what lets your phone sign back in on its own after a backup or a transfer to a new phone. Leave it alone and it takes care of itself. Remove it from any device and that phone stays signed in for now but won't come back on its own after a restore; it makes a new one the next time you sign in there.